Google’s Excellent 2Q15 Earnings Have Re-Rated Its Stock
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Google remains the dominant player in the search ad market
The search advertising business remains Google’s (GOOG) most valuable business. Google dominates the US desktop search ad market with a share of 64%, according to a June 2015 report from comScore. The chart below shows Microsoft (MSFT) ranked as the distant second player with a share of 20% and Yahoo (YHOO) the third-ranked player with a share of 13%.
Google has lost too many search deals to competitors lately
Some risks have increased that can disrupt the Google’s dominance in this market. The company has lost too many search deals to competitors. Recently, Microsoft reported that it will hand over the display advertising operations to AOL (AOL). In exchange, AOL will replace Google’s search engine with Microsoft’s Bing for the next ten years.
This isn’t the first time this kind of thing has happened with Google. In November last year, Mozilla announced that it will replace Google with Yahoo as the default search engine on its Firefox browser in the United States. This deal did affect Google, and we covered this in Mozilla’s Deal with Yahoo Impacted Google . In 2013, Apple (AAPL) also replaced Google with Microsoft’s Bing on Siri with the launch of iOS7 in 2013.
Although Google doesn’t seem to have been affected by these incidents in the short term, the search giant could definitely be affected in the long term once users start using the default search engines more often. For diversified exposure to Google, you can consider investing in the PowerShares QQQ Trust, Series 1 (QQQ). QQQ invests 3.5% of its holdings in Google.